2022 / 07 / 21
There is a general misconception when it comes to taxes and deceased estates that the tax affairs of a deceased are handled and finalised by SARS. However, this is not the case as the onus in fact rests with the Executor of the estate to bring the tax affairs of the deceased up to date and to finalise the matter. The tax compliance element is generally overlooked by many but is in actual fact the most important aspect within the sphere of deceased estates due to the fact that no estate can be finalised and no inheritance can be paid out without the tax affairs of the deceased being up to date and without clearance first being received from SARS.
Every estate must be reported to SARS, whether the deceased was a taxpayer or not, so that the tax affairs of the deceased can be finalised. When a new estate is reported to SARS, the estate is divided into two halves, 1) personal income tax of the deceased and 2) taxable income on the estate after death:
1) Personal income tax:
- Personal income tax refers to the tax payable on the income the deceased received while he/she was still alive.
- All outstanding tax returns up until the date of death of the deceased must be submitted to SARS for processing.
2) Taxable income on estate after death:
- Once SARS is satisfied that the personal income tax of the deceased is up to date, they close the existing tax reference number of the deceased and issue a new tax reference number for the estate.
- They then turn their attention to any possible taxable income which may have accrued to the estate after the death of the deceased.
- A few examples of taxable income on the estate after death could be interest received on any accounts/investments from the date of death to the date the funds are paid into the estate late bank account.
- Once SARS are satisfied that there is no more taxable income payable by the estate, SARS issue a deceased estate compliance certificate in which SARS confirm that both the deceased in his/her personal capacity and the estate is tax compliant and that no funds are due and payable to SARS.
The above information is a very broad and general overview of how the tax process works within the field of deceased estates and how these matters are finalised. As stated above, this is a crucial obstacle to overcome and it is important to address the situation nice and early during the administration process because without receiving the deceased estate compliance certificate from SARS, the respective beneficiary’s inheritance cannot be paid out and the estate cannot be finalised until the compliance certificate is received. This article serves to provide a general insight into taxes within deceased estates and to enable you to have a basic understanding of what may be required of you should you ever be confronted with a similar situation in the future.
